Southern Star Central Gas Pipeline, Inc. v. Edgen Murray Corporation
MEMORANDUM OPINION AND ORDER Signed by Chief Judge Joseph H. McKinley, Jr. on 9/15/2016 denying 18 Motion to Dismiss; denying 23 Motion to Strike. cc: Counsel(JBM)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
CIVIL ACTION NO. 4:15-cv-00145-JHM
SOUTHERN STAR CENTRAL GAS
EDGEN MURRAY CORPORATION
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Defendant’s Motion to Dismiss and Motion to Strike
[DN 18, 23]. Fully briefed, these matters are ripe for decision. For the following reasons,
Defendants’ Motion to Dismiss is DENIED, and Defendant’s Motion to Strike is DENIED AS
This matter concerns a contract between Southern Star Central Gas Pipeline (hereinafter
“Southern Star”) and Edgen Murray Corporation (hereinafter “Edgen”) for the provision of steel
pipe for a natural gas pipeline system in Colorado and Wyoming. Southern Star is a natural gas
transmission company headquartered in Owensboro, Kentucky. In 2013, Southern Star was
planning to construct a pipeline project in Colorado and Wyoming that required the purchase of
four miles of milled pipe. On April 29, 2013, a representative for Southern Star requested a
quote on the milled pipe from Edgen, a supplier of milled pipe with whom Southern Star had an
ongoing business relationship since 2007.
A representative from Edgen’s office in St. Louis,
Missouri, delivered a quote for the milled pipe to Southern Star on May 3, 2013.
Southern Star then submitted a purchase order to Edgen on May 9, 2013, ordering the
milled pipe as quoted. The purchase order sent by Southern Star stated, “Southern Star Central
Gas Pipelines standard terms and conditions apply to this order unless other terms mutually
agreed upon with vendor are referenced herein. A copy of the terms and conditions is available
upon request.” (Pl.’s Compl. [DN 1-2] at 5). These terms and conditions included the following:
This Order shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Kentucky.
Seller agrees that any action of any type which relates to or arises
out of any provision of this Order shall be brought in the
appropriate state court in Kentucky or the United States District
Court for the District of Kentucky, and consents to accept service
of process in connection with any such action brought before any
such courts and waives the defense of lack of personal jurisdiction
in connection with any such action.
(Id. at 15–16). At no time before the pendency of this action did Edgen request a copy of the
terms and conditions.
Edgen obtained the pipe necessary to fulfill Southern Star’s order from Northwest Pipe
Company (hereinafter “Northwest”), a pipe manufacturer.
This pipe was manufactured in
Atchinson, Kansas, and then delivered to a coating facility in Schererville, Indiana, where
Southern Star took possession of the pipe. Edgen then mailed Southern Star seven separate
invoices for the pipe, which were each paid in full. Southern Star transported the pipe to the
project location in Cheyenne, Wyoming, and began work on the pipeline. Installation and testing
were not complete until January 2014. Upon testing, the milled pipe supplied by Edgen failed
three separate hydrostatic tests. Southern Star notified Edgen of the failure, rejected the pipe,
and uninstalled it from the pipeline. Edgen obtained replacement pipe from Paragon Industries,
Inc. in Oklahoma to serve as a replacement for the defective pipe, which Southern Star accepted
Southern Star filed the present action on November 13, 2015, alleging breach of contract
by Edgen for supplying defective pipe and seeking damages for the additional costs incurred due
to this breach. [DN 1]. Edgen filed a motion to dismiss, asserting both a lack of personal
jurisdiction and improper venue, and also asserting that this Court should abstain from hearing
this action due to a pending action Edgen has filed against Northwest in a Texas state court based
upon the failure of the same pipe as in this case. [DN 18]. Following Southern Star’s response
to this motion, Edgen also filed a motion to strike portions of the affidavit of Duane Kirkendoll
[DN 21-2] as lacking proper foundation and being based upon hearsay. [DN 23].
II. PERSONAL JURISDICTION
A. STANDARD OF REVIEW
The Court will first consider Edgen’s motion to dismiss for a lack of personal
jurisdiction. The burden is on the Plaintiff to demonstrate that jurisdiction exists. See Theunissen
v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991). To make such a showing, “the plaintiff may
not stand on his pleadings but must, by affidavit or otherwise, set forth specific facts showing
that the court has jurisdiction.” Id. Further, when presented with a Rule 12(b)(2) motion, “the
court has three procedural alternatives: it may decide the motion upon the affidavits alone; it may
permit discovery in aid of deciding the motion; or it may conduct an evidentiary hearing to
resolve any apparent factual questions.” Id. (citation omitted).
In this case, Edgen has sought an evidentiary hearing. However, Southern Star has not,
nor does the Court believe the facts require one. If the Court determines the jurisdictional issue
on written submissions only, the plaintiff “need only make a prima facie showing of
jurisdiction.” CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). When making
such a determination without an evidentiary hearing, “the court must consider the pleadings and
affidavits in a light most favorable to the plaintiff.” Id. Furthermore, the court must “not consider
facts proffered by the defendant that conflict with those offered by the plaintiff.” Neogen Corp.
v. Neo Gen Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002).
Subject matter jurisdiction in this case is based on diversity of citizenship pursuant 28
U.S.C. § 1332. In a diversity case, a federal court determines whether personal jurisdiction exists
over a nonresident defendant by applying the law of the state in which it sits. Third Nat'l Bank v.
WEDGE Group Inc., 882 F.2d 1087, 1089 (6th Cir. 1989). The Court applies a two-step inquiry
to determine whether it may exercise personal jurisdiction over a nonresident defendant: “(1)
whether the law of the state in which the district court sits authorizes jurisdiction, and (2)
whether the exercise of jurisdiction comports with the Due Process Clause.” Brunner v.
Hampson, 441 F.3d 457, 463 (6th Cir. 2006).
In its original complaint, Southern Star stated that Edgen was subject to personal
jurisdiction by virtue of the forum selection clause in the parties’ contract. [DN 1]. Upon Edgen
arguing in its response that the forum selection clause was invalid, Southern Star amended its
complaint to assert that this Court had personal jurisdiction over Edgen through both the forum
selection clause and Edgen’s contacts with Kentucky. [DN 13]. Edgen asserts that neither the
forum selection clause nor Edgen’s contacts with Kentucky are sufficient to establish personal
jurisdiction. However, the Court finds that the forum selection clause is valid and enforceable.
A party to a contract may waive its right to challenge personal jurisdiction and venue by
consenting to both in a forum selection clause. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1,
11 (1972). Whether a forum selection clause can be enforced is a matter of federal procedure
and thereby decided under federal law. Wong v. PartyGaming Ltd., 589 F.3d 821, 828 (6th Cir.
2009). Generally, forum selection clauses are prima facie valid and should be enforced unless
enforcement is shown by the resisting party to be unreasonable under the circumstances. M/S
Bremen, 407 U.S. at 10; Wong, 589 F.3d at 827; Moses v. Bus. Card Exp., Inc., 929 F.2d 1131,
1136 (6th Cir. 1991). According to the Sixth Circuit, in evaluating the enforceability of a forum
selection clause, the Court looks to the following factors: “(1) whether the clause was obtained
by fraud, duress, or other unconscionable means; (2) whether the designated forum would
ineffectively or unfairly handle the suit; and (3) whether the designated forum would be so
seriously inconvenient such that requiring the plaintiff to bring suit there would be unjust.”
Wong, 589 F.3d at 828 (citing Security Watch, Inc. v. Sentinel Systems, Inc., 176 F.3d 369, 375
(6th Cir. 1999)).
In this case, the purchase order sent from Southern Star to Edgen stated that Southern
Star’s standard terms and conditions applied, and that these terms and conditions were available
upon request. These terms and conditions contained a forum selection clause that stated that the
seller under the purchase order “waives the defense of lack of personal jurisdiction in connection
with any such action” to be brought in either federal or state court in Kentucky. (Pl.’s Compl.
[DN1-2] at 16). Neither side disputes that Southern Star never sent these terms to Edgen or that
Edgen never requested them.
However, “a contracting party has an affirmative duty to
familiarize itself with the terms and conditions contained in other documents incorporated by
reference.” Glenn Hunter & Assoc., Inc. v. Union Pac. R.R. Co., 135 F. App’x 849, 855 (6th Cir.
2005). See also Int’l Ass’n of Machinists and Aerospace Workers v. ISP Chemicals, Inc., 261 F.
App’x 841, 848 (6th Cir. 2008) (citing Std. Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440,
447 (3d Cir. 2003) (“[I]ncorporation by reference is proper where the underlying contract makes
clear reference to a separate document, the identity of the separate document may be ascertained,
and incorporation of the document will not result in surprise or hardship”). Thus, Edgen must
bear the burden of its lack of knowledge of any forum selection clause, as it failed to adequately
investigate what terms and conditions were incorporated through the purchase agreement.
Further, the forum selection clause was not obtained by fraud, duress, or other
unconscionable means. Southern Star used the same purchase order at least four times during the
transaction that is the subject of the litigation, and each time, it contained the same language that
certain terms and conditions applied that were available upon request. Nor has Edgen presented
any evidence that this forum would be so unfair or inconvenient that the forum selection clause
must be disregarded.
Edgen argues that this Court should find the forum selection clause invalid by citing
primarily to two cases, Lightyear Communication, Inc. v. CNS Communication, Ltd., 2002 WL
1540703 (W.D. Ky. Jan. 23, 2002) (hereinafter Lightyear I) and Lightyear Communication, Inc.
v. Xtrasource, Inc., 2004 WL 594998 (W.D. Ky. Feb. 4, 2004) (hereinafter Lightyear II), in
which forum selection clauses were found to be invalid. However, both cases were decided on
the basis of considerably different facts. In Lightyear I, an alleged forum selection clause was
determined to be invalid due to the signed contract having been lost and the plaintiff being
unable to prove its contents without the original. Lightyear I, at *3. There is no such problem in
this case, as neither party disputes the contents of the purchase order at issue. And in Lightyear
II, a forum selection clause that was found in the plaintiff’s standard service agreement was not
applied to a contract which did not contain the entire contents of the standard service agreement,
giving the defendant no notice of potential additional terms and conditions that may require
investigation. Lightyear II, at *2–3. In this case, however, Edgen received the purchase order in
its entirety, which clearly stated that Southern Star’s terms and conditions applied and were
available upon request.
In both Lightyear I and II, there were doubts as to whether the
defendants had notice as to the possibility that other terms and conditions applied, whereas in this
case Edgen merely asserts it had no notice as to the contents of those additional terms and
conditions. Edgen had notice that other terms and conditions applied, and it bore the risk of not
investigating those terms by requesting a copy of them.
Therefore, the Court finds that the forum selection clause is valid and enforceable. Thus,
the Court has personal jurisdiction over Edgen by means of consent. Because of the validity of
the forum selection clause, it is unnecessary to determine whether personal jurisdiction exists on
the basis of the Kentucky long-arm statute and constitutional due process requirements.
For the reasons stated above, the Court finds that venue is also appropriate by means of
consent. Thus, it is unnecessary to determine whether venue is proper under 28 U.S.C. §
IV. MOTION TO STRIKE
Edgen filed a motion to strike portions of the affidavit of Duane Kirkendoll, the Senior
Strategic Sourcing Specialist for Southern Star. This affidavit was submitted with Southern
Star’s response to Edgen’s motion to dismiss. [DN 21-2]. However, this affidavit related to the
contacts Edgen had with Kentucky for the purpose of establishing personal jurisdiction over
Edgen. Because this Court has determined that personal jurisdiction exists through the forum
selection clause and irrespective of any contacts Edgen may have had with Kentucky, the motion
to strike is moot. Therefore, the motion will be DENIED AS MOOT.
V. COLORADO RIVER ABSTENTION
The final matter that must be addressed is whether this Court should abstain from hearing
the present action due to Edgen’s pending litigation against Northwest in a Texas state court.
Edgen filed its action against Northwest in June 2015, claiming that the contract between
Northwest and Edgen requires Northwest to indemnify Northwest for any liability it may incur
towards Southern Star due to the alleged defects in the pipe, along with various breach of
warranty claims. [DN 18-9]. However, Edgen did not amend its petition to add Southern Star as
a defendant in that action until December 9, 2015, after Southern Star had already filed this
present action against Edgen. Because of this ongoing Texas action, Edgen requests in its
motion to dismiss that this Court stay or dismiss this action under the doctrine of abstention.
A. STANDARD OF REVIEW
This Court analyzes such a request under the so-called Colorado River abstention
doctrine. Under this doctrine, federal courts have a “narrow exception” to their “virtually
unflagging obligation . . . to exercise the jurisdiction given them” where there is (1) “parallel”
litigation pending in state court, and (2) the proposed litigation in federal court would be
duplicative or unwise. Colorado River Water Conservation District v. United States, 424 U.S.
800, 817–18 (1976); Bates v. Van Buren Tp., 122 F. App’x 803, 806 (6th Cir. 2004); Gottfried v.
Med. Planning Servs., Inc., 142 F.3d 326, 329 (6th Cir. 1998).
The threshold question in the Colorado River abstention analysis is whether there are
parallel proceedings in state court. Crawley v. Hamilton Cty. Comm'rs, 744 F.2d 28, 31 (6th Cir.
1984). To be “parallel”1 the proceedings have to be “substantially similar.” Romine v.
CompuServe Corp., 160 F.3d 337, 340 (6th Cir. 1998). This means that neither the issues nor the
parties have to be identical. Heitmanis v. Austin, 899 F.2d 521, 528 (6th Cir. 1990). If the Court
determines the two concurrent actions in state and federal court are parallel, it must then weigh
“However, cases are not considered parallel if there is an issue that would not be resolved by the state court upon
the completion of the state court action.” Kopacz v. Hopkinsville Surface and Storm Water Utility, 714 F. Supp. 2d
682, 686 (W.D. Ky. 2010) (citing E.ON U.S. Services, Inc. v. QSC Painting, Inc., 2008 WL 3982499 (E.D. Ky. Aug.
26, 2008); PNC Bank, Nat’l Ass’n v. Person, 2007 WL 1423744 (W.D .Ky. May 8, 2007)). See also Wright v.
Linebarger Googan Blair & Sampson, LLP, 782 F. Supp. 2d 593, 603–604 (W.D. Tenn. 2011).
various factors2 that rest on “considerations of wise judicial administration, [and give] regard to
conservation of judicial resources and comprehensive disposition of litigation.” Romine, 160
F.3d at 339 (quotations omitted).
This Court rejects Edgen’s request for abstention. This present action and the action in
Texas state court are not parallel actions, as they involve the interpretation of two separate
contracts with different rights and obligations. Whether Edgen is liable to Southern Star for the
defective pipe can be established without regard to any potential obligation Northwest may have
to indemnify and defend Edgen. The two actions will involve some of the same operative facts,
mainly whether the pipe was defective. But the rights and obligations of the parties under their
respective contracts are independent of each other, and the outcome of each party’s claims will
depend on independent interpretations of how those facts apply to each contract. Parallel actions
require more than simply similar facts. See Romine, 160 F.3d at 340–41 (finding parallel
litigation in state and federal class action lawsuits where both asserted many of the same claims
against most of the same defendants but had different named plaintiffs in each); Medtronic, Inc.
v. Royer, 2013 WL 1411227, at *6 (W.D. Ky. Apr. 8, 2013) (finding parallel litigation in state
and federal actions that would require interpretation of the same release and settlement
agreement in both cases).
This Court requires the “clearest of justifications” to surrender
jurisdiction to a state court proceeding, as abstention is only appropriate in the face of
“exceptional circumstances,” Colorado River, 424 U.S. at 813, 819, and Defendant Edgen has
Factors the Court should weigh include: (1) whether state court has assumed jurisdiction over any res or property,
(2) “the inconvenience of the federal forum,” (3) “the desirability of avoiding piecemeal litigation,” (4) “the order in
which jurisdiction was obtained by the concurrent forums,” Colorado River, 424 U.S. at 818 (internal quotations
omitted), (5) whether the source of governing law is state or federal: (6) the adequacy of the state court action to
protect the federal plaintiff's rights; (7) the relative progress of the state and federal proceedings and (8) the presence
or absence of concurrent jurisdiction. Romine, 160 F.3d at 340–41 (internal quotations omitted).
not met its burden of showing that two actions are parallel proceedings. See Starr v. Hill, 2010
WL 2521378, at *9 (W.D. Tenn. June 16, 2010) (citing Answers in Genesis of Ky. v. Creation
Ministries, Int’l Ltd., 556 F.3d 459, 467 (6th Cir. 2009)) (“As the party seeking abstention, the
Defendant bears the burden to prove it is warranted”).
Even if the two proceedings were parallel, the balance of factors to be considered under
Colorado River would still weigh against abstention. For example, the Texas state court has not
exercised jurisdiction over any property at issue in this case. There has been no showing that this
federal forum is inconvenient to either party. While Edgen did file its action against Northwest in
Texas state court before Southern Star brought this action, this action was already pending when
Edgen moved to join Southern Star as a party to the Texas. And finally, Southern Star is
currently contesting the Texas state court’s assertion of personal jurisdiction over it, raising
doubts as to whether Southern Star may even be properly joined as a party in that case. Because
the proceedings are not parallel, and the balance of factors weighs against abstention, Edgen’s
request for abstention is denied.
For the reasons set forth above, IT IS HEREBY ORDERED that Defendant’s Motion to
Dismiss is DENIED, and the Defendant’s Motion to Strike is DENIED AS MOOT.
September 15, 2016
cc: counsel of record
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